Nebius Group NV (NBIS) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter and Full Year 2020 Financial Results Call. I must advise you this conference is being recorded today, Tuesday, the 16th of February 2021.

We would now like to hand the call over to your first speaker today, Yulia Gerasimova, Investor Relations Director. Please go ahead.

Good afternoon, and good morning, everyone, and welcome to Yandex Fourth Quarter 2020 Earnings Call. You can find our earnings release and supplementary slides on our IR website. The key speakers on our call today are Tigran Khudaverdyan, our Deputy Chief Executive Officer; Daniil Shuleyko, our Chief Executive Officer of Yandex.Taxi; and Greg Abovsky, our Chief Operating and Chief Financial Officer. Yevgeny Senderov, Chief Financial Officer of Yandex.Taxi, will be available on the Q&A session.

Now I will quickly walk you through the safe harbor statement. The various remarks that we'll make during the call regarding our financial performance and operations may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the Risk Factors section of our most recent Annual Report on Form 20-F filed with the SEC.

During the call, we'll be referring to certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP measures in the earnings release we published today.

And now, I'm turning the call over to Tigran.

Thank you, Yulia, and thanks to everyone for joining our call today. In Q4, we continued to focus on deepening the integration between our businesses and developing cross service products to strengthen our platform. Yandex.Plus is one of the most important pillars in our ecosystem strategy. The total number of subscribers reached 6.8 million at the end of December. The strong momentum continued into this year and our subscriber base is now approaching 8 million, including over 1 million from Taxi.

We are very encouraged by the results since the upgrade of the program in August and introduction of cash backs. In particular, we have seen an improvement in conversion from trials to paid subscriptions as well as a better cross service usage.

We also see that the average spend increases once users subscribe to Yandex.Plus. For example, the GMV generated by a Plus member on Yandex.Market marketplace is on average 25% to 30% higher than for other customers. We believe other benefits of our subscription model will be in the areas of customer retention and customer acquisition costs.

We plan to further expand the cash back program to other services. From this week, Yandex.Eats and Lavka are also part of a cash back program.

With that, let me walk you through the key highlights for Q4. Starting with e-commerce. Internally, we see e-commerce as being much more than just the Yandex.Market. In addition to our market place GMV, it also includes GMV of our e-grocery business Lavka as well as FMCG related GMV of Yandex.Eats.

We believe this better reflects the Yandex overall exposure to e-commerce and is, therefore, more comparable to the results of our peers. We are very pleased that our total e-commerce GMV grew threefold in 2020 to over RUB 56 billion. And specifically in Q4, we saw year-on-year growth of 127%. Note that this doesn't include GMV that goes through Yandex.Market price comparison platform and our logistics services, which together account for another RUB 230 billion.

For Yandex.Market Q4 was in the first quarter with slight comparison and marketplace operating as a single platform under one brand. The rebranding process went well as we successfully moved our existing buyers and merchants to the new platform.

At the same time, as we expected, this was a transitional quarter our customers were getting used to the new interface, which marginally slowed our GMV growth during the holiday season. This effect was temporary and the market GMV growth were accelerated in early 2021.

Despite our branding and very limited marketing support throughout most of last year, the number of active buyers increased by 2.4x and now over 6 million, and our assortment has expanded by more than 3x and it has reached 2 million SKUs.

We have launched on-demand delivery options synergizing the Yandex.Market and portfolio capabilities of Yandex.Lavka. This service offers 15 to 30 minute delivery to door and is now available to all users in Moscow, parts of St. Petersburg and Nizhny Novgorod. Integration with the Yandex.Plus has also deepened in addition to cash back, most of our Plus subscribers get free delivery on their orders above RUB 700. In mid-January this year, we decreased our commission for merchants, which are now the most attractive on the market.

In the second half of 2020, we laid the foundation for the integration of market with other businesses. 2021 will be much more about fast growth, more active transition of merchants from the CPC to CPA models and also expanding our logistics infrastructure.

Moving to Search and Portal. Our total Search share reached a new record of 59.7% in Q4, which represents a further 40 basis points increase from Q3 and 220 basis points increase year-on-year. Search has been a key driver behind the recovery and advertising revenue in Q4. Our fixed CPA model is also gaining traction among small and mid-sized advertisers. We launched it in Q2 and it already accounts for almost 6% of total advertising revenue as of mid-February and over 10%, specifically within the Yandex Advertising Network.

For 2021, our priorities include video [VCP] and a subscription model for SME clients. We believe this initiative will helps us to maintain advertising revenue growth at or above the dynamic of the digital ad market in Russia. We are very encouraged by the trends we are seeing in them. Their audience has reached 20.3 million users, up 51% year-on-year.

Users consistently spent over 40 minutes per day on our platform, 23% of which is on video. In addition to solid use of engagement we have seen revenue growth recovering to our pre-COVID trajectory in December. Then revenue reached RUB 13.1 billion on an annualized run rate basis, growing 49% year-on-year.

Media Services. We have already discussed our progress with Yandex.Plus, but another important milestone for the team was achieving more than 3 million viewing subscribers per month as of January. Based on our internal estimates, we believe this makes us the leader in the Russian OTT market ahead of both EV and auto.

Finally, a couple of words on cloud. The business continued its rapid expansion and reached an important milestone of RUB 1 billion in revenue in 2020, growing 4.5x year-on-year. Importantly, this impressive revenue growth was driven by both customer base expansion and higher usage per customer.

In December, we had approximately 15,000 active users. The number of paying customers increased 40% compared to December 2019 to almost 10,000, while the average share grew 180% year-on-year.

To sum up, we entered 2021 in very good shape with a diversified range of services. Our advertising and ride-hailing businesses are likely to gain from the anticipated economic recovery. We also expect to maintain solid growth momentum in services that have benefited from the pandemic, including in media services, food delivery, logistics and e-commerce. We will continue to work on the further integration of services within our platform, while exploring new opportunities such as fintech.

And with this, I'm turning the mic over to Daniil.

Thank you, Tigran, and hello, everyone. 2020 was a truly transformational year for the Taxi group as we expanded beyond our core ride-hailing services into other verticals. As a result of our efforts, we finished this challenging year with a diversified portfolio which, in addition to the ride-hailing service also food and grocery delivery, B2C and B2B logistics as well as car sharing. This transformation supported solid revenue growth of 54% year-over-year in Q4. Over 40 percentage points of this growth was driven by our new businesses, Lavka, Eats and Logistics.

Let me comment on the performance of each business line. Ride-hailing excluding logistics services was affected by the second phase of the pandemic as the number of COVID cases in Russia increased significantly in Q4 and the authorities had to implement additional restrictions. While these restrictions were not as severe as in the United States and some European countries, they still adversely affected our ride-hailing growth rate.

In Q4, rides and GMVs were up 17%, revenues grew 15% year-over-year, while adjusted EBITDA of the business group, 86% on the back of multiple optimization in 2020. In Q4, revenues of ride-hailing totaled to 55% of the total Taxi revenues versus 74% a year ago.

Logistics became a key focus area. On a full year basis, revenue contribution for logistics was not that material, but it accelerated meaningfully as 2020 progressed, supported by investments. As a result, in December, logistics [services] reached 55 million deliveries.

FoodTech continued to perform very well. Yandex.Eats, our food delivery service demonstrated an acceleration of year-over-year growth rate. Yandex grew 118% GMV increased 137%, while revenues were up 171% year-over-year in Q4. City grocery, where we deliver groceries directly from food retailers started to ramp-up inside Eats in Q3 2020 and was one of the drivers of GMV growth in Q4 as the average shares of groceries is approximately 40% higher than in restaurant delivery.

In December, e-grocery contributed low teens of its total GMV offering deliveries from [bunch of] retail chains. Also on food deliveries excluding grocery orders also show year-over-year growth rate acceleration in orders in GMV. We believe that despite the high base in 2020, fueled by the pandemic, Eats demonstrated high double-digit growth in orders in 2021.

This grocery orders contributing half of the growth. Lastly, our express monthly grocery delivery services delivered RUB 4.1 billion in revenues or 18% of Taxi Group's total in Q4. Sequential growth rate in Q4 accelerated compared to Q3. Lavka finished the year with 270 dark stores, while adjusted EBITDA loss of the services has been constantly moderating. However, Yandex approach to grocery is beyond just what (inaudible) grocery offer in Yandex. Our e-commerce marketplace, Yandex.Market has a significant portion of GMV generated by FMCG expanded in 2020 compared with 2019.

Internally, we start to look at all our grocery initiatives as adjusting businesses. Earlier, Tigran provided our total e-commerce GMV in 2020, consistent of Yandex.Market, marketplace, Lavka grocery is to know the JV to just food e-commerce, the aggregate JV of our is grocery Lavka and market (inaudible) categories, reached approximately RUB 34 billion in 2020 and grew 366% year-over-year. This already makes us one of the largest, if not the largest e-comm food retailers in the country, and we don't intend to stop here.

Grocery retail is an enormous market opportunity, where we are well positioned to become the leader and penetrate into other consumption scenarios with a variety of our other services.

At the same time, we define our opportunity beyond just grocery and beyond just e-commerce markets in Russia. We believe that our core addressable market is the overall Russian retail market, which in 2020 was approximately USD 520 billion, not much lower than the retail market in U.K., by the way.

The overall Russian retail market is highly fragmented, (inaudible) but there is a clear trend towards online, when we have just a few high-quality companies capable to oscillate the shift to online. We believe we are one of such players and we'll be focused to scale up our presence on this market including the regions.

Turning to the regions. As you know, in early February, we announced acquisition of selected assets of Vezet Group, including the call centers and logistics business services. If the transaction goes beyond just ride hailing and will help us to expect our other services in the region.

It is also beneficial for the regional development of e-commerce, which is an important part of Yandex strategy. This acquisition will allow us to significantly improve customer care in the regions on the base of existing call centers of Vezet, which, as you know, are very efficient. Assuming successful integration, we expect to reach a robust supply demand platform and offer drivers a variety of options to earn money beyond just ride-hailing.

Assuming completion of the integration in April, we expect to see the impact of mid- to high single digits, incremental to our (inaudible) JV on annual basis in 2021.

With this, I'm turning the mic over to Greg.

Thank you, Daniil, and hello, everyone. We're happy with our Q4 and fiscal year 2020 results, which yet again demonstrated the resilience of our business model and our financial discipline. Two things to highlight. Firstly, how diversified our business has become. The nonadvertising segments accounted for almost half of our total revenue for the full year 2020.

5 years ago, over 90% of our revenue was from Search and Portal. Secondly, Search and Portal is clearly no longer the only business segment generating cash flow, allowing us to fund our new investments into attractive opportunities. Ride-hailing generates solid margin and is now the second largest business within the group, with a very sizable contribution to the group adjusted EBITDA, helping us to fund our initiatives in FoodTech and Logistics.

Now let me walk you through our Q4 performance and share the details of the latest trends across our businesses. In Search and Portal, despite a more challenging macro backdrop in Q4,  Search and Portal revenue growth improved to 8% year-over-year from 2% in Q3. Our ex TAC revenue increased to 14% year-over-year compared with 8% growth in the third quarter.

This solid growth was supported by advertising revenue recovery and our TAC optimization efforts as well as by the strong performance of our devices business. So far, we're seeing that the momentum has continued in Q1 to date. Industry-wise, the dynamic was similar to Q3 with the best-performing industries, including IT and telecom, FMCG, finance and insurance and health care. While the worst-performing are still travel, domestic services and real estate. Although we started to see gradual recoveries in autos as the supply and demand balance is normalizing there.

Search and Portal adjusted EBITDA margin was 46.6% in Q4 2020. Importantly, our adjusted EBITDA margin, excluding IoT, came to 50.4%, up 400 basis points year-over-year. Despite investments into Yandex.Plus and ad technologies, the margin was supported by TAC optimization, improving efficiency and tight cost control.

Moving on to Taxi. Taxi Group revenues increased by 54% year-on-year, driven by the strong performance of our FoodTech business, including Lavka and Eats as well as Logistics. Revenues of ride-hailing and FoodTech services grew 65% year-on-year. Despite the second wave of the pandemic, which put pressure on mobility and on ride-hailing demand during the important holiday period in December, the growth of the ride-hailing and FoodTech segment remained solid and even slightly accelerated compared to 64% in Q3. This is because growth was supported by an acceleration of revenue growth in Eats as well as the continued rapid expansion of Lavka.

Adjusted EBITDA of the Taxi Group was RUB 1.8 billion in Q4, slightly higher than Q3 in absolute terms. It's important to note that our adjusted EBITDA in the ride-hailing segment, excluding logistics, increased 97% year-on-year for the full year 2020 despite many challenges and revenue slowdown in the back of COVID.

Ride-hailing also remains the key funding source for the development of FoodTech services. Yandex.Eats performed very well and accelerated revenue growth to 171% year-over-year in Q4. This segment posted a small adjusted EBITDA loss in Q4 which is primarily the result of the undersupply of couriers at the end of the quarter. The combination of very high demand for food delivery services, harsh weather conditions and border closures, all resulted in significant increase in delivery cost per order. Yandex.Drive, again, delivered positive adjusted EBITDA in Q4 for the second quarter in a row.

Turning to Yandex.Market. Yandex.Market revenue increased 17% year-over-year in Q4. Price comparison revenue growth accelerated sequentially to 29% year-over-year from 23% in Q3. Our marketplace orders more than doubled despite the rebranding efforts that we undertook in Q4 as we end-of-life the Beru brand and rebranded it as Yandex.Market.

Despite solid orders growth, GMV growth slowed down compared to Q3, primarily due to lower AOVs. Revenue from the marketplace was also affected by our success in shifting to 3P model, with 66% share compared to only 30% share of 3P in Q4 of 2019. And Q4 was, in many ways, a transitional quarter for us, and we're already seeing meaningful reacceleration in growth of GMV in January and February month-to-date.

The adjusted EBITDA loss of Yandex.Market amounted to RUB 3 billion in Q4, up from RUB 2.9 billion loss in Q4 '19.

Now on to other businesses. Media Services delivered another quarter of strong performance with revenue growth of 118% year-over-year, while subscription-based revenues more than doubled in Q4, reflecting strong subs additions and a growing number of paying subscribers.

Growth remained solid in the quarter to date. The level of investments in Q4 was RUB 1.1 billion, which is comparable to Q3 levels. We continue to invest in quality content, including our original series, which helped us to achieve a leading position in the OTT market by the number of monthly viewing subscribers.

Revenue in Classifieds grew 13% year-over-year in Q4, just slightly under 16% growth in the previous quarter. The supply chain challenges that led to the depleted car stocks of dealerships continue to weigh in on the pace of recovery. However, we've seen a reversal of this trend since December, with revenue growth in January returning to the high teens. We expect the market situation to normalize by the end of Q1 2021.

Profitability-wise, we achieved a record high adjusted EBITDA margin of 33% as a result of positive operating leverage and a number of cost-saving initiatives.

Turning to other bets and experiments. Revenue increased by 56%, primarily driven by strong revenue growth in Zen, further recovery in Geo as well as our rapidly growing cloud business, which delivered over 300% revenue growth in Q4. The adjusted EBITDA loss amounted to RUB 1.5 billion in this segment on the back of improving profitability in Geo, Zen and cloud and growing investments in development of our self-driving technology and education platforms.

Finally, a couple of words on our outlook. Assuming no further escalations of pandemic, we expect our group revenues in full year 2021 to be between RUB 305 billion and RUB 320 billion. We believe the growth of the online advertising market would likely be in the mid-teens in 2021, and we expect our Search and Portal revenue to grow at least in line with the market. We expect a stable year-over-year margins in search and portal excluding the effect of the device business.

We expect both our Yandex.Market marketplace GMV as well as our total e-commerce GMV, including Lavka as well as grocery GMV generated by Yandex.Eats to grow 2.5x in 2021 despite the high base in 2020, where we saw normally high demand during the lockdown months. To support the growth, we will significantly increase investments with a focus on logistics infrastructure, last mile delivery and improving customer experience.

We anticipate our CapEx to remain in low double digits as a percentage of the total group revenue, including planned investments in our new campus. Excluding campus construction costs, we expect our CapEx to sales to be in the high single-digit range.

With this, I'm turning the mic to the operator for the Q&A session.

(Operator Instructions) And we take our first question from Cesar Tiron of Bank of America.

I have 2, so I'll use that as a follow-up, if that's okay. So the first one would really be on the ad trends, can you please repeat what you're seeing in Q1? And how that compares with Q4? And maybe if December was particularly stronger, and it is a pattern of better month-on-month comp as we move towards 2021?

And then the second question, can you please help us understand better. I know you mentioned some elements in the opening remarks. But just on the e-commerce business, on the slowdown and the trends that you're seeing in Q1? And how long do you think this integration issues that you mentioned will [settle].

Cesar, it's Greg. Thank you very much for your questions. Let's start off with the advertising trends that we are seeing. So if you look at the ex-TAC Search and Portal revenue growth, we're seeing that January is more or less on par with what we saw in November and what we saw in the quarter overall. We definitely did see a slight acceleration in December as some of the budgets were pulled in. But overall, I would say the trends we're seeing are fairly solid.

And then turning to your second question in terms of e-commerce. So Q4 was very much a transitional quarter for us. I mentioned that we end-of-life, the previous brand for our marketplace, Beru. We shifted everything on to the Yandex.Market platform and began transitioning both merchants and consumers to this new brand.

We saw solid trends in GMVs. But we also saw the following: we saw a rapid uptick in 3P, which obviously translates into lower revenues since we only recognize the commission portion. We also saw lower AOVs, which I think was potentially seasonal. What we're seeing in Q1 to date is we're seeing a pretty strong reacceleration in Yandex.Market. We're actually quite happy with the performance that we're seeing there. GMVs are growing. The platform is stabilizing. The number of users on the platform is growing significantly. So I'd say, overall, we're pretty optimistic about the outlook for the segment.

The next question comes from Slava Degtyarev of Goldman Sachs.

My first question would be on self-driving. Can you please share some recent data points of the key milestones that you managed to achieve in the self-driving division? And also what you are most focused on in 2021? Is it increasing the number of miles driven, some geographic expansion or maybe potential partnerships?

On SDG, some data points is we currently have 160 cars, autonomous cars, which are spread between Russia, U.S.A. and Israel. We've accumulated 6 million autonomous miles on public roads. We continue to improve in terms of the disengagement rates we're seeing. And overall, I think we're very happy with the progress there.

We've also been investing in our delivery robot called Yandex.Rover. Obviously, that is more a testing phase now, but it is delivering in parts of Moscow and as well as Innopolis and Kazan. And you may have seen maybe on Instagram, maybe on Facebook, videos that people post of the delivery Rover actually delivering food for both Yandex.Lavka and Yandex.Eats and I think that's an exciting opportunity for it.

And at the same time, we are exploring various partnership opportunities with SDG and both auto OEMs and Tier 1 suppliers. So I think this is a business that is progressing well. I think we found more interesting applications beyond just self-driving there. And I think we're very happy with the progress.

Okay. And my follow-up would be on e-commerce. So basically, it's been more than 6 months since you delivered the strategic outlook on the segment with the acquisition of Sberbank stake. Can you share maybe the updated vision over the past towards profitability, the leadership targets? Or any other learnings that you made over the last half year? Have your views changed anyhow since then, especially taking into account the competitive developments?

Yes, sure. So we've been actually kind of pulling the various assets that we have, and we're looking at the picture today as one that's much more complex, where we're serving the consumer with a range of different products. We're able to deliver groceries to them within 20, 30 minutes using Yandex.Lavka. We're also able to deliver groceries to them from retailers kind of using the Instacart model, if you will, within Yandex.Eats.

And then Yandex.Market itself, which has a much more -- much wider selection of goods, approximately 2 million SKUs as of Q4, which we attempt to deliver next day or beyond. I think we have a range of assets that we can bring to bear to attack this problem. And the assets that we have within Yandex, which I think should help us achieve leadership position in e-commerce or the following. Obviously, we have a large and growing base subscription customers of Yandex.Plus, all of whom receive free shipping whenever they spend more than RUB 700 in the Yandex.Market.

So that's 8 million consumers that we can sell and deliver Yandex.Market products to you. We currently have about 30 million transacting customers per month across our various platforms, whether its Yandex.Go or Yandex.Market or Yandex.Lavka, Yandex.Eats.

Also, we cover something like 20 million consumers, 20 million adults with 15 to 30 minute delivery from Yandex.Lavka stores, which provides us with this last leg of deliveries. And so what we've been doing is we've been actually offering consumers in Yandex.Market, the following use case. You can actually get something delivered to you in Moscow and St. Petersburg and Nizhny the very next day any time you need it.

So instead of having to coordinate with courier or having to go to a pickup point, or a pickup locker you essentially click a button inside of the app and a courier is dispatched to you and brings you something within 20, 30 minutes. And obviously, at that point, we try to upsell the consumer with more products, more groceries from Yandex.Lavka, and I think that's getting a lot of traction.

And obviously, we have this last mile which we've built up with Yandex.Taxi and Yandex.Logistics. I mentioned the number of deliveries we're doing in Logistics, and that business is really growing very, very rapidly with lots and lots of businesses connected to that platform.

So overall, I'd say the market is dynamic. The market is competitive. There's strong competition, but we are looking to invest meaningfully in this. We're looking to spend $400 million to $500 million across the various e-commerce initiatives that we have at Yandex, including Yandex.Market, Yandex.Lavka. And the grocery part of Yandex.Eats, and we still aim to be a top player in this market in a few years.

The next question comes from Ulyana Lenvalskaya of UBS.

Congratulations on good numbers. I just wanted to discuss a couple of high level questions, if I may. Firstly, on the basis of the guidance presentation, and thank you for providing the guidance at all. At the moment, the COVID situation in Russia is quite favorable. So all the restrictions are essentially being lifted. Would it be fair to say that the guidance this time is not really super conservative, if it's based on the current environment in the sense?

Yes. I think the guidance is based on the situation as we currently see it.

So any like third wave or any restrictions again would suggest downside risk?

Correct. I mean, I think if things get better, I think there's upside room and if things get worse, there's downside room, I think the guidance is the current view of the management as we sit here today?

Fine, fine. And Greg, secondly, what is the current thinking about fintech initiatives? What are the options management team is considering? There were local discussions about Yandex buying some sort of a bank again. How far does the rumors are from reality?

Yes. Look, on fintech, this is -- there's a lot of preparatory work that's taking place now. We are spending a whole lot of time on it. It's one thing that we absolutely feel like we were going to do. We think it fits very well with all of our transactional products, with our e-commerce products and with just the vast ecosystem that we've built.

I'm not going to sort of speculate on specific rumors in the market, but I would say that if we need certain licenses, we will go out in the market and acquire them to sort of jump-start the process. And to sort of talk to you when it's appropriate.

The next question comes from Miriam Adisa of Morgan Stanley.

The first one is on Yandex.Market. Apologies if you covered this in the prepared remarks, but just wanted to get a sense of how we should think about the EBITDA losses this year in e-commerce. Is it reasonable to take the 4Q run rate for this year? Or should we assume another step up, given what you were saying earlier about introducing free delivery and also reducing merchant commissions?

Miriam, I covered it a little bit, but I'll just repeat it. What I've said and the answer to, I think, Slava's question on e-commerce was the following. Yes, we do indeed plan to accelerate the pace of investments in e-commerce. What we're looking to spend is $400 million to $500 million across all of our e-commerce assets. That includes Yandex.Market, obviously, but it also includes our investments in Yandex.Lavka, which is our 20-minute delivery, 1P based as well as Yandex.Eats the grocery portion of that, which is the Instacard model.

So across all of those assets, we're looking to spend $400 million to $500 million, and we believe that, that will allow us to dramatically accelerate the pace of growth and sort of kind of climb the ranks, if you will, in the competitive landscape?

Okay. And then my second question is just on the smart speaker IoT contribution. I mean, it seems to be having a bigger impact on the margin, but for such important, but just wondering how much of this was just seasonal? Or how we should think about the contribution both to sales and then also the impact from such important margin this year?

A lot of it was seasonal. I think it's a high-class problem. The products are selling very well. We're getting a lot of traction, both with our large speakers, the new large speaker that we put out called the Station Max as well as the Mini. All of those are selling very well. And in total, we generated something like $4 billion of revenue from devices. And we also see that the unit economics are improving.

To that end, you should expect, I think, those device trends to continue. Obviously, there's seasonality in that business, as you know well. But we also expect that as unit economics improve, the drag on Search and Portal margins should decrease over time.

And I think I'm extremely proud of the work that the team has done with these products. They are clearly the market leader in the Russian market by a very, very wide margin. And we're looking to see if there are other applications of smart speaker and Internet of Things technologies beyond just speakers with things like televisions, that's where we're also building ourselves into.

And obviously, that fits very well with the story around media services with KinoPoisk and with Yandex.Plus subscriber base, which is growing rapidly.

The next question comes from Vladimir Bespalov of VTB Capital.

My first question is on your guidance for GMV of your -- all your e-commerce assets in 2021. If I get it correct, it should be something like about RUB 140 billion this year. And basically 2.5x growth is good, but this doesn't resolve the key issue, bridging the gap with your competitors, which might grow slower. But in absolute terms, they will be growing much faster than you. So how do you expect to bridge this game -- gap? And basically, what are the reasons, maybe which preventing you from doing this in 2021, the fulfillment capacity. And the second question is kind of related to this.

Maybe you could update a little bit on your strategy for the development of Yandex.Lavka. How are you going to grow this business? Are you going to expand it to the regions to grow the number of dark stores or maybe integrated closely to Yandex.Market? Maybe you can provide more color on this.

Vladimir, great questions. So you got it correctly in terms of the guidance around GMV. We do expect that the GMV, both of Yandex.Market itself and of e-commerce overall, so including contributions of Lavka and groceries within Yandex.Eats, will increase by 2.5x. And so the number you provided of about $140 billion GMV is more or less in the ballpark, right?

I think that puts us squarely in the #3 slot in the Russian e-commerce landscape, which is, I think, a very, very formidable achievement in a very short period of time. At the same time, we recognize that the market is competitive. And I think our competitors e-commerce are very strong, and we have a tremendous amount of respect for them. And what we're focused on is delivering on the customer experience and bringing to bear whatever assets we have in this battle, if you will.

And I think I listed them when I talked to Slava just earlier on. Hopefully, that answers that.

And then on the question around Lavka, I would say that our strategy is certainly to go beyond just Moscow and St. Petersburg. We do expect to roll those out, and we've actually been looking to expand those beyond just Russia as well. As you know, we have a small experiment in Israel, and that's showing some promise. But focusing on the Russian regions, we are looking to expand Lavka. It may not be the exact same type of Lavka. We may make some alterations to the model, but the premise will be the same.

So maybe the SKU assortment will be a little different. Maybe the price points will be a little different. But we do think that there is a real need for this, and we also think of this as a very important part of the overall e-commerce strategy.

Yes, I just want to add a quick point that Lavka already, we see it as a logistics infrastructure platform. And already, currently, we have a Lavka dark store within 30-minute walking radius for 20% of Russian adult population. So that's going to grow going forward.

And of course, we're going to focus on integrating it into our overall e-commerce and overall ecosystem.

(Operator Instructions) The next question comes from Lloyd Walmsley of Deutsche Bank.

2 questions probably for Greg. They're kind of related. I guess, first, just that vision of connecting Yandex.Plus with the Yandex.Market, Lavka, kind of how far along in the integration? Are you maybe in markets where it's rolled out, what percent of transactions are running through the Lavka delivery kind of and how that's impacting user behavior and unit economics?

And then the second one is just can you give us a sense of what you're doing to drive that 3P mix higher in the market? And how is that maybe impacting gross margins and EBITDA margins? And related to that, like are your third-party sellers bearing the cost of a lot of the logistics? Or are you guys still absorbing a lot of that to drive market share?

So on Yandex.Plus and Market integration, those are fairly fresh, and those have all taken place in the last, call it, 6 months. In fact, the idea that deliveries above RUB 699 will be free for Yandex.Plus subscribers is very recent. And we think that this is a big opportunity. We see that those users that have Yandex.Plus are spending considerably more on Yandex.Market. On average, we're seeing 25% to 30% higher GMVs from Yandex.Plus subscribers on Yandex.Market. And obviously, we're focused on growing cross service usage through various mechanics within our apps.

And then on the question of 3P, what I could tell you is we are -- we obviously are focused on building a 3P marketplace. This is the idea that we have, and it's to enable merchants. It's not to compete with merchants. To that end, we've been investing aggressively. And just recently, we dramatically lowered our commission on Yandex.Market. So the take rates are some of the most attractive in the market on the Russian landscape.

I think they're probably the most competitive and the most attractive. And obviously, 3P is more favorable to marketplace margins compared to 1P products, that's obvious, but we're also investing heavily to attract more merchants onto the platform.

The next question comes from Ildar Davletshin of Wood & Company.

And congratulations on very good results. So one question I wanted to ask on the Taxi and broad logistics business, specifically with drivers. We know there was a bit of tightness in the market last year at certain periods of time. Do you see any further tightness, especially given the drive in the growth in e-commerce deliveries?

And what's the situation with potentially migrants if the borders are reopening? And if you could specify the level of subsidy that you had in your Yandex.Taxi business? That will be my first question.

And I'll just ask a follow-up on your guidance. Have you included any benefits from the tax maneuver on your guidance for margin for this year? And also on the cost-cutting that you launched last year, have you already incorporated the growth in additional headcount and pay this year? Or are you still operating in a more cautious environment? And so that could [come] the growth in cost in 2022, which you kind of deferred last year.

Let me take the second question first, and then I'll pass it on to Yevgeny to give you some color on the first question. On the margins, I would say that we baked into our outlook, the various things as we see them today. I think this is -- Ulyana asked this earlier, but our guidance provides the outlook as we currently see it. And then in terms of sort of our pace of hiring, we did exercise quite a lot of discipline in 2020. And I think we're pretty proud of that. In 2021, we do plan to expand the pace of hiring, and that's built into the margins as well as the pace of investments in various e-commerce initiatives as I just sort of covered them.

And Yevgeny, you can take the question on drivers and borders.

Yes. Ildar, as kind of -- as far as drivers and borders and the couriers, I think -- [and you might] like to separate. First of all, in Taxi, we did see some tightness, but I think that began to reverse itself at the end of last year. What we are experiencing right now is very high search pricing really related to the -- so the even unusually cold and snowy winter for Russia.

So our GMV is growing in excess of our trips growth right now. If we talk about CPO in terms of delivery, yes, CPO was affecting sort of cost per delivery [across both] our Eats and other businesses was affected by courier under supplies and the borders have been closed. And of course, the seasonality that I already mentioned. Again, winter in Russia is cold and snowy even for Russia this time. And that's affected the overall food delivery market.

But we have seen -- we've started to see signs that sort of normalization. So current CPO in the Eats business, for example, is down roughly 15% from the peak levels in December. And we expect going forward, this is going to moderate.

The next question comes from Ulyana Lenvalskaya of UBS.

I just wanted to follow-up on a couple of things. Firstly, the cloud business performance looks really impressive. Could you consider showing this separately as a business unit?

Ulyana. Yes, I think we're pretty happy with the cloud business is currently progressing. It grew significantly in Q4, and we expect that it's going to grow further this year. We expect that it should approximately triple in 2021. And I think as we get more and more traction, we will likely break it out as a business unit.

Internally, it's already set up as a business unit. And we think that this is a a great form for encouraging entrepreneurship at Yandex, and I think it's been very successful in all of our endeavors, and we think that this will help us win in cloud as well.

Okay. And Greg, I remember on the first quarter 2020 call, we were discussing the capital management comp, which actually helped to the margin in Search and Portal. Was this thing reversed within 2020? Or do you plan to reverse it like in the coming quarters?

So we didn't reverse it in 2020. We are expecting to pay bonuses, and we have gone back to normal salaries for management in 2021. So assuming we achieve our KPIs and our targets in 2021, management will be paid bonuses in 2021.

In 2020, like I said before, management decided to forego all bonuses at the beginning of the pandemic.

The next question comes from Sebastian Patulea of Jefferies.

I've got 2, and I'll give the second one as a follow-up, please. First point is regarding grocery delivery. There has been a focus recently on building your grocery delivery offering. And indeed, in that regard, the latest proof point, your partnership with Metro in Kazan. Can you please discuss the unit economics or the dynamics of building partnerships with preestablished retailers such as Metro versus building your own stores?

And also in that regard, what are some of the key points or levers that you look at when deciding between offering delivery via partnership or via dark store? Second one is regarding Search and Portal. Globally, we're seeing governments aiming to force search engines to pay publishers for news. Is this a threat to your cost base? Or you don't see the dynamic at play in Russia? That's it.

Sebastian, on the first question, so it's a very interesting question. And obviously, where we have both the 1P model with Lavka and a 3P model that's Instacart like in Yandex.Eats. I would say that the differentiation is more about the customer experience when consumers choose to have groceries delivered from Yandex.Eats, they are looking for specific products from specific stores. i.e., they want a specific stake from Miratorg or they want a specific popcorn from VkusVill and so they choose to order it there.

And the experience in terms of click to eat time or order completion times are a little bit longer. You're a little bit less accurate because, obviously, you don't know exactly what's in stock at every given minute in the retail store because you don't have 100% integration and the retailers themselves don't exactly know what's on the shelf.

With Yandex.Lavka, you're offering a smaller SKU mix, you're offering more rapid delivery, and it's a slightly different consumer experience. And I think there's definitely a place for both. And we will continue to pursue both of those models. Specifically on Metro and Kazan, I'm not going to comment because we have a lot of experiments with lots and lots of different partners.

And then on to your second question with the Search and Portal and paying for news. So that hasn't -- that question hasn't really gotten a lot of traction here. But obviously, once -- and once it does, if it does, we will explore it and figure out what to do with that. I think right now, it's just not something that's top of the agenda.

The next question comes from Anna Kurbatova of Alfa-Bank.

Very simple question. When the Taxi IPO might return to the company's agenda, so what conditions you will be looking for? I mean, in terms of the overall business of Taxi and segments, profitability, organizational things and the capital markets.

So I would say that the consideration of the IPO of Yandex.Taxi is not on the agenda. We are focused on building the leading digital platform in the countries in which we operate. And we see a ton of synergies between the various assets that we have.

I think the power that we have is the platform that we've built and being able to offer all of these services to consumers whenever they want whatever they want, is what gives us real strength. And so I think pursuing an IPO is just not something that we're considering.

And the next question comes from Cesar Tiron of Bank of America.

I'd like to ask 2 more questions, if that's okay. The first one would be on Zen. Do you believe that Zen is monetized to its full potential to date? So I'd like to explain what I mean by that. Of course, if you increase further the number of users, and even usage, you get further impressions, et cetera, and the revenues will increase. But with the current user base and the current usage that you see on them is it, in your view, monetized to its full potential? Or do you think there is a significant amount of inventory, which is not used? Or do you think that the pricing has scope to increase significantly? So that's the first question.

And then the second one would be on the margins. Usually, Greg, you make some comments on these calls on profitability outlook, I might have missed it, but is there anything you'd like to tell us for 2021?

Sure. On Zen, so it's a great question that you asked. So I would say what we're seeing with Zen is that there's probably not a whole lot of opportunity to increase monetization in its current format. The massive opportunity that we see to increase modernization in Zen is through new formats. And specifically, it is app install ads, and video within the feed. And there, I would say that we're investing a lot of time and a lot of effort to make this a much larger business.

So if you took just the existing news feed and said, "Hey, is there a lot of inventory there that you guys are not monetizing? The answer is no. But what you could do is and what we're in the process of doing is replacing some of that existing ad inventory with new formats. And I think we're getting -- finally, starting to see traction with app install ads with video. And you saw that video is growing as a percentage of total time spent as a percentage of total time spent is over 23% now. And we also see that the number of users is growing rapidly.

So while revenue was up something like 49% year-over-year in December, their users were growing 51% in December, which is, I'd say, incredibly impressive. And currently, kind of quarter-to-date, we're seeing -- we're toying with 22 million daily average users, which is just fantastic. So lots of opportunities for new products within Zen, and we're excited about that. And then on margins, we said that we expect that our Search and Portal margins to remain at the same level in 2021 as in 2020, excluding the impact of devices.

And I think to the question on that Miriam asked around smart speakers. We expect that the headwind from devices should decline over the course of the year, right? As the devices become more profitable as we're no longer subsidizing them quite as much, there should not be as much of a drag on margins.

There are no further questions at this time. I would like to turn the call over to Yulia Gerasimova for any additional or closing remarks.

Thank you very much for joining us all today, and thank you for your questions. If there's any follow-up questions, please contact the IR team. Goodbye until next time.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.